U.S. home buyers are gaining tens of thousands in purchasing power as mortgage rates drop.
With 30-year fixed mortgage rates declining from 7.79% in October 2023 to 6.2% last week, home buyers in the 100 largest U.S. cities have gained a median of $70,000 in additional buying power for the same $2,100 monthly payment, according to a Realtor.com analysis.
In other words, a U.S. buyer can now afford a home $70,000 more expensive than what they were planning to purchase last year.
The findings are based on the monthly payment for a median-priced home in the U.S., a 20% down payment and a 6.2% mortgage rate. The analysis applied the same method to each of the 100 largest cities, calculating how much extra buying power homebuyers have in each local market compared with last year.
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Perhaps unsurprisingly, buyers in cities with the most expensive homes saw their spending power increase the most. In San Jose, California, for example, buyers can now afford a home worth $1.6 million for the same monthly payment they could get a $1.4 million home a year ago, according to Realtor.com.
Those savings will likely grow, too. With the Federal Reserve cutting its benchmark federal funds rate by 50 basis points last week, mortgage rates are forecasted to decline to 6% or less at some point in 2025.
If that happens, additional buying power for homebuyers in the 100 largest metro areas would increase to $84,800 for a median-priced home, compared with October 2023, according to the analysis.
Here are the 15 metro areas where buying power has increased the most based on 6.2% and 6% mortgage rates. Buying power is how much more home a buyer in each market can afford compared with October 2023.
1. San Jose
- October 2023 median list price: $1,380,694
- Extra buying power with 6.2% rate: $240,556
- Extra buying power with 6% rate: $275,489
2. Los Angeles
- October 2023 median list price: $1,159,000
- Extra buying power with 6.2% rate: $201,931
- Extra buying power with 6% rate: $231,254
3. San Francisco
- October 2023 median list price: $1,098,000
- Extra buying power with 6.2% rate: $191,303
- Extra buying power with 6% rate: $219,083
4. Ventura County, California
- October 2023 median list price: $1,050,000
- Extra buying power with 6.2% rate: $182,940
- Extra buying power with 6% rate: $209,506
5. San Diego
- October 2023 median list price: $999,000
- Extra buying power with 6.2% rate: $174,054
- Extra buying power with 6% rate: $199,330
6. Bridgeport, Connecticut
- October 2023 median list price: $889,225
- Extra buying power with 6.2% rate: $154,928
- Extra buying power with 6% rate: $177,426
7. Boston
- October 2023 median list price: $837,374
- Extra buying power with 6.2% rate: $145,894
- Extra buying power with 6% rate: $167,081
8. Honolulu
- October 2023 median list price: $798,750
- Extra buying power with 6.2% rate: $139,165
- Extra buying power with 6% rate: $159,374
9. Seattle
- October 2023 median list price: $792,250
- Extra buying power with 6.2% rate: $138,032
- Extra buying power with 6% rate: $158,077
10. New York
- October 2023 median list price: $729,444
- Extra buying power with 6.2% rate: $127,090
- Extra buying power with 6% rate: $145,545
11. Sacramento, California
- October 2023 median list price: $649,000
- Extra buying power with 6.2% rate: $113,074
- Extra buying power with 6% rate: $129,494
12. Denver
- October 2023 median list price: $635,000
- Extra buying power with 6.2% rate: $110,635
- Extra buying power with 6% rate: $126,701
13. Portland, Oregon
- October 2023 median list price: $619,995
- Extra buying power with 6.2% rate: $108,021
- Extra buying power with 6% rate: $123,707
14. Washington, D.C.
- October2023 median list price: $599,995
- Extra buying power with 6.2% rate: $104,536
- Extra buying power with 6% rate: $119,717
15. Portland, Maine
- October 2023 median list price: $599,950
- Extra buying power with 6.2% rate: $104,528
- Extra buying power with 6% rate: $119,708
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